LONDON (Reuters) – British house prices dropped by a bigger-than-expected 0.6% in January and are now 3.2% below their peak in August, following a surge in borrowing costs and broader inflation pressures, mortgage lender Nationwide Building Society said on Wednesday.
January’s decline in house prices was the fourth drop in a row and twice the size expected in a Reuters poll of economists, adding to signs that the market is slowing sharply.
Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”, which set market interest rates soaring.
“There are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover,” Nationwide chief economist Robert Gardner said.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks,” he added.
House prices in January were 1.1% higher than they were a year earlier, down from a 2.8% increase in December and a rise of 1.9% expected in a Reuters poll of economists.
(Reporting by David Milliken; editing by Sarah Young)
